Grayscale met with SEC to discuss Bitcoin ETF conversion

  • Grayscale met privately with SEC to convince the U.S. regulator to approve the conversion of its flagship fund into an ETF.
  • Grayscale put forth a 24-page presentation outlining the need for BTC spot ETF approval.
  • The deadline for the SEC to approve or reject Grayscale’s application is 6th of July.

Grayscale, leading asset manager, had met privately with the Securities and Exchange Commission(SEC) recently to convince the regulator to approve the conversion of its flagship fund into an ETF.

 According to the 24-page publicly released presentation, Grayscale believes turning the Grayscale Bitcoin Trust into an NYSE-traded ETF would help broaden access to bitcoin and enhance protections while unlocking up to $8 billion in value for investors. The company noted that the trust, known by its GBTC ticker, has traded at an average 25 percent discount to the price of its underlying asset since early 2021, a discount that should disappear upon conversion.

Grayscale had constantly been pressurizing SEC to approve the first spot-based bitcoin ETF. The asset manager has watched as major competitors, including ProShares win approval for futures-based bitcoin exchange-traded funds, showing that the SEC is more comfortable with products based on futures over those based on bitcoin.

The SEC in April had approved a futures-based fund from Teucrium. This application was under the Securities Acts of 1933 and 1934 whereas the previous bitcoin (BTC) ETF approvals had been under the Investment Company Act of 1940. Grayscale Chief Legal Officer Craig Salm noted that the Teucrium advancement indicates the U.S. regulator is not only comfortable with ETFs regulated under the 40 Act but also the 33 and 34 Acts, which is what spot bitcoin ETFs would be regulated under.

A spot-based bitcoin ETF would be a significant milestone in the adoption of digital assets because it would help open them up to ordinary investors in a familiar wrapper that trades like a stock. Grayscale’s first application for a spot bitcoin ETF was in 2017.

GBTC holds approximately 3.4% of the world’s bitcoin and is owned by over 850,000 U.S. accounts, according to Grayscale. 

Grayscale, on the one hand, criticized SEC but on the other also put efforts to flatter the U.S. regulator in the hopes that it would help accept its application.

“The SEC is uniquely positioned to support the White House Executive Order to ensure America leads in digital asset innovation,” according to one slide.

Grayscale further argued that SEC is discriminating against issuers by approving bitcoin futures ETFs and denying bitcoin spot ETFs.

The investment firm also engaged in a public letter-writing push, flooding the SEC with over 3,000 letters in support of its application. The deadline for the SEC to approve or reject Grayscale’s application is July 6.The SEC has reinstated that it is concerned with the potential for manipulation and fraud in bitcoin markets and has indicated it won’t approve a spot-based application until global exchanges are better regulated.

Grayscale pointed out that a spot bitcoin ETF is “no riskier” than futures-based ETFs, since both the markets are both affected by the underlying price of bitcoin and track each other closely. The asset manager in its slides also outlines its increasing disclosures tied to GBTC and its network of partners, including BNY Mellon and Coinbase, who are ready to help its conversion process.

Saniya Raahath
Saniya Raahath

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